The names of top boxer Vijender Singh, tennis legend Leander Paes and ace shooter Abhinav Bindra were also doing the rounds for the honour.
Vijender, Sushil and Bindra had all returned with medals from the last edition of the Games in Beijing in 2008.
Indian Olympic Association (IOA) acting President V K Malhotra announced that Sushil will be India's flag-bearer.
Bindra, the country's first individual gold medallist at the Olympics, was reportedly the preferred candidate of the IOA but since his 10m air rifle event is scheduled three days after the opening ceremony on July 30, the shooter wanted to focus on his preparations.
Similarly, Vijender's weigh-in is scheduled for July 28 so it was tough for him to do the honours.
Paes had led the contingent in 2000 Sydney Games and IOA decided Sushil should do the honours this time.
